Michael Conway, CEO of Air Jamaica, was given the job last year to turn around the carrier. - file
Finance Minister Omar Davies will shortly seek Cabinet approval of a new restructuring plan for Air Jamaica, including the possible change of the airline's fleet from Airbus to Boeing planes, the latest in the long list of efforts in stemming the losses and bringing viability to the government-owned carrier.
However, Davies told the Financial Gleaner Wednesday that Government remained committed to the existence of the airline as a strategic economic asset, despite the urging of the International Monetary Fund that it be let loose or even closed, but indicated that the administration did not have the appetite for Air Jamaica's demand for subsidies.
"We are committed to the airline, but we are interested in new paths," he said.
Under finance portfolio
In normal circumstances, Air Jamaica would be the responsibility of a transport minister. But for much of the past decade, even during its period of privatisation, the airline has fallen within Davies' portfolio because of its appetite for Government subsidies and the finance minister's control of the national purse strings.
Davies, however, declined to say what precisely would be in the presentation he plans to make to ministerial colleagues within a fortnight - the latest in a raft of measures to keep Air Jamaica in the skies during its 37 years of existence - except to confirm that it would include an option to move to Boeing planes, which would require a decision by the end of November.
"That is one of the issues," Davies said. "Boeing is offering us some interesting things. They are making presentations to us and a decision has to be made within a month."
Air Jamaica moved fully to an Airbus fleet in the mid to late 1990s, when the airline was controlled by Gordon 'Butch' Stewart's AJAG Group and the Government had a minority stake - first 25 and then 49 per cent.
At the time Stewart boasted that not only did Air Jamaica have the newest fleet in this region, but defended the shift to Airbus on grounds that the mainly A300, A320 and A321 aircraft were more efficient to operate and most suitable for Air Jamaica's routes. AJAG claimed, too, that it had good lease arrangements.
Unavailable for comment
Air Jamaica managers have been unavailable for comment on the technical and cost-benefit reasons why a shift to Boeing planes would now make sense, but costs would likely be an important factor. There were hints, too, that capacity for strategic partnerships would be a factor.
During its decade of ownership by AJAG, Air Jamaica lost nearly US$800 million, including US$113 million during the last year of Stewart's control in 2004. Stewart, however, blamed much of the accumulated loss on problems beyond his group's control, including, during the early period, restrictions on where Air Jamaica could fly in the U.S. because of weak regulatory oversight in Jamaica, and then a decline in global travel and high fuel price that followed the terror attacks in the United States in 2001.
When the Government took back the airline, Davies promised to cap government subsidies at US$30 million annually, but Air Jamaica lost US$136 million in 2005, a situation that caused the IMF, in a July report, to repeat its long-held view that perhaps radical surgery was necessary.
"If Air Jamaica's (current) restructuring plan failed to improve finances, the authorities may need to reconsider the merits of maintaining a flag carrier," the IMF said.
Davies, however, suggested that closure of Air Jamaica, which transports nearly 50 per cent of Jamaica's passengers and about a third of all tourists to the island, was not an option for the Government at this time. Jamaican officials, across administration, have insisted that the airline is crucial to the country's key tourism industry.
"It is a pragmatic position," Davies said. "We have seen in other areas where other airlines use their monopoly positions (after the collapse of national carriers) to push up fares to the detriment of countries."
Lookout for partners
Davies, nonetheless, said that the Government remained on the lookout for private sector partners for Air Jamaica, although there was "nothing immediately on the horizon."
Neither were there talks between Jamaica and other regional countries about the merger of airlines, despite the fact that other state-owned airlines also struggle and look to governments for shoring-up.
One such carrier, the Eastern Caribbean commuter airline, LIAT (1974) Ltd, owned primarily by Barbados, Antigua and St. Vincent, has begun merger talks with the privately held Caribbean Sun, owned by the Antigua-based Texan, Alan Stanford. Liat loses about US$10 million a year and has debts of about US$270 million.
BWIA, the Trinidad and Tobago airline, which, like Air Jamaica, returned to state ownership in 2004 after a decide of private sector control, has survived only because of government direct subsidies and the underwriting of its loans.
Remaking itself
Now the insolvent carrier is remaking itself. The old business is to be wound up and a new company, Caribbean Airways - a name once used by a defunct Barbadian government-owned carrier - is to start flying January 1.
A merger between Air Jamaica and BWIA has been floated, and rejected, in the past. Davies indicated that nothing like that was on the agenda at this time, but suggested that there were possible areas of cooperation.
"There are possibilities, for instance, in the standardisation of fleet," he said.
BWIA mainly flies Boeing aircraft having pulled back in the late 1990s from an intended move to Airbus planes. Sharing part inventories, technical personnel would possibly be an advantage if Air Jamaica and BWIA standardise their fleet, as Davies appeared to suggest was a live option.
- business@gleanerjm.com
